BAWAG Group AG: H1 2019: Strong profit before tax of EUR 287 million, +6% vs. H1 2018

Vienna (pta006/30.07.2019/07:00 UTC+2) -

- Profit before tax (PBT) of EUR 287 million, +6% vs. H1 2018; pre-tax EPS EUR 2.90
- Net profit of EUR 219 million, +8% vs. H1 2018; EPS of EUR 2.21
- Fully loaded CET1 ratio of 15.1% after absorbing impact from German/Swiss acquisitions
- Capital return on track, regulatory approval process ongoing
- On track to meet full year targets

BAWAG Group today reports a strong profit before tax of EUR 287 million and net profit of EUR 219 million, up 6% and 8% respectively versus the prior year, for the first half 2019. The increase was primarily driven by higher operating income. The Bank delivered a return on tangible common equity of 13.8%, a cost-income ratio of 42.9% and a CET1 ratio of 15.1%. On a pro forma basis the return on tangible common equity was 17.8%, with a CET1 ratio of 12.7%.

"BAWAG Group delivered strong results in the first half 2019 with a profit before tax of EUR 287 million and a net profit of EUR 219 million. In addition to our strong operating performance, we closed on our leasing and factoring acquisitions from 2018 and continued to make progress across various operational and strategic initiatives. The recently closed acquisitions complement our Retail & SME business in Germany and emphasize our focus on building out our Retail & SME business across the DACH region. We are on track to deliver on all of our targets in 2019 as we continue to adapt to the changing operating environment. While the market environment for European financials continues to be challenging, the fundamentals of the bank remain strong. We will continue to focus on the things that we control, driving operational excellence, and continuing to pursue disciplined and profitable growth," commented Chief Executive Officer Anas Abuzaakouk.

Delivering strong results in the first half 2019
Core revenues increased by 4%, to EUR 578 million compared to the prior year reflecting core product net asset growth as well as the consolidation of the recent acquisitions. Net interest income rose by 6% to EUR 435 million. Net fee and commission income decreased by 2% to EUR 143 million. Operating expenses were up 3% compared to the first half 2018, reflecting the consolidation of the acquired businesses in 2018 and 2019. This was partly compensated for by the integration of Südwestbank and a continued focus on driving operational efficiencies across the Group.

The cost-income ratio was down 0.8pts versus the prior year to 42.9% and is in line with our 2019 target of under 43%. Our fully loaded CET1 ratio increased to 15.1% (14.9% in Q1 2019). Gross capital generation of approximately 60 basis points in the second quarter 2019 funded the closing of the latest acquisitions of BFL Leasing GmbH and Health Coevo AG in Germany.

Customer loans increased by 2% compared to December 2018. The overall customer loan book continued to be comprised of approximately 72% exposure to the DACH region and approximately 28% exposure to Western Europe and the United States.

In the first half 2019, the NPL ratio stood at 1.8% with a risk cost ratio of 14 basis points, which reflects our continued focus on proactive risk management, maintaining a conservative risk profile, and focus on developed markets.

Note: "Pro forma" takes into account normalized regulatory charges, the proposed share buyback of up to EUR 400 million as well as the dividend accrual for H1 2019. (Pre-tax) Earnings per share (EPS) before deduction of AT1 dividend.

Customer business segment performance in the first half 2019

Segment	Retail & SME	Corporates & Public
PBT (in EUR million)	185	95
Net profit (in EUR million)	139	71
RoTCE	20.2%	12.5%
Cost-income ratio	43.5%	35.7%
Risk cost ratio	0.38%	(0.12%)
NPL ratio	1.9%	1.2%

The Retail & SME segment delivered a profit before tax of EUR 185 million during the first half 2019. Core revenues increased by 5% versus the first half 2018 reflecting our German/Swiss acquisitions and growth in our core products. Operating expenses increased by 7% due to the consolidation of the acquisitions. Our stand-alone strategy in Austria, Concept 21, is progressing well with a full separation from the Austrian Post by end of 2019. At the same time, we enhanced our digital capabilities by launching our point-of-sale finance offering and releasing our new mobile banking app "klar". Additionally, our launched retail partnerships represent important new customer acquisition channels. In the first half 2019, we launched our partnerships with MediaMarktSaturn Austria, METRO Cash & Carry Austria and the jö bonus loyalty club of REWE Group, of which we are the launch financial partner.

The Corporates & Public segment delivered a profit before tax of EUR 95 million during the first half 2019. Core revenues remained broadly stable with a focus on risk-adjusted returns. Operating expenses decreased by 14% reflecting ongoing efficiency measures. We see good opportunities across asset backed lending transactions. However, we continue to see pricing pressure across the Corporate lending space. Our focus will continue to be on risk-adjusted returns, disciplined underwriting and being patient without ever chasing volume.

Additional highlights

- BAWAG Group awarded "Austria's Best Bank 2018" by Global Finance
Global Finance, one of the leading magazines for finance and capital market issues, awarded BAWAG Group as "Austria's Best Bank" for the third consecutive year. We are honored to be recognized again for the successful development of the Bank.

- jö bonus Club
In February 2019, REWE Group in Austria and other leading retail partners established Austria's largest customer club: the jö bonus Club. We are excited to be the launch partner for the jö bonus Club in the financial services sector. The bonus club was launched in May 2019.

- Initiatives for total capital optimization
BAWAG Group completed its total capital optimization. In March 2019, BAWAG Group issued EUR 400 million Tier 2 capital. BAWAG P.S.K. successfully returned to the covered bond market by issuing a EUR 500 million mortgage covered bond with a tenor of 15 years in June 2019, demonstrating solid access to long-term funding at attractive terms.

- Launch of new digital banking app "klar"
In May 2019, BAWAG P.S.K. launched its new digital banking app "klar". We have redesigned our digital banking to provide customers with a completely new, digital customer experience. The new app "klar" includes various new and improved banking functions. New features such as the personal finance manager "klar sehen" and the "klarPIN" for bank transfers lead to a simplification of online self-service.

- Closing of all 3 acquisitions signed in 2018
In March 2019, we closed the acquisition of Zahnärztekasse AG in Switzerland and in May 2019, we announced the successful completion of the acquisition of BFL Leasing GmbH and Health Coevo AG. BFL Leasing GmbH, headquartered in Eschborn near Frankfurt, Germany, is a specialist financing provider offering technology and equipment leasing products and services. Health Coevo AG, headquartered in Hamburg, Germany, is a leading dental factoring market player offering dental financing products and settlement services.

- BAWAG P.S.K. acquires 49% of Finventum GmbH - the creator of Savity
In June 2019, BAWAG P.S.K. acquired a 49% stake in the fintech Finventum GmbH, the creator of Savity Vermögensverwaltung GmbH (Savity). easybank has started a partnership with Savity to offer access to Savity's services to easybank customers. The Savity service provides easybank customers access to professional wealth management at initial investment levels of EUR 10,000.

Outlook and targets

BAWAG Group delivered strong results in the first half 2019 and we are on track to meet our full year targets.

Our targets for 2019-2020 are as follows:

Targets	2019	2020
Profit before tax growth	>6%	>6%
Profit before tax (absolute)	>EUR 600m	>EUR 640m
Cost-income ratio	<43%	<40%
Return on tangible common equity	15% to 20%	15% to 20%
Common Equity Tier 1 capital ratio (fully loaded)	12% to 13%	12% to 13%
Pre-tax earnings per share (in EUR)	>6.00	>6.40
Post-tax earnings per share (in EUR)	>4.50	>4.80

In terms of capital generation and return, we target an annual dividend payout of 50% of net profit attributable to shareholders and will deploy additional excess capital to invest in organic growth and pursue earnings-accretive M&A at returns consistent with our Group RoTCE targets.

To the extent excess capital is not deployed via such organic growth and M&A, we are committed to distributing excess capital to shareholders, based on an annual assessment. The Managing Board is actively evaluating share buyback options. On 30 April 2019, the AGM approved our proposed resolutions to buy back and cancel own shares of up to EUR 400 million (pending regulatory approvals) and we paid a dividend of EUR 215 million (50% of 2018 attributable net profit) for 2018 on 10 May 2019.

About BAWAG Group
BAWAG Group AG is the listed holding company of BAWAG P.S.K., which is headquartered in Vienna, Austria, with the main subsidiaries easybank, easyleasing and start:bausparkasse in Austria, Südwestbank, BFL Leasing GmbH, Health Coevo AG and start:bausparkasse in Germany as well as Zahnärztekasse AG in Switzerland. With 2.5 million customers, BAWAG P.S.K. is one of Austria's largest banks operating under a well-recognized national brand and applies a low-risk, efficient, simple and transparent business model focused on Austria, Germany and developed markets. The Bank serves retail, small business and corporate customers offering comprehensive savings, payment, lending, leasing, investment, building society, factoring and insurance products and services through various online and offline channels. Delivering simple, transparent and best-in-class products and services that meet our customers' needs is the consistent strategy across all business units.

BAWAG Group's Investor Relations website https://www.bawaggroup.com/ir contains further information, including financial and other information for investors.

Contact:

Financial Community:
Jutta Wimmer (Head of Investor Relations)
Tel: +43 (0) 5 99 05-22474

IR Hotline: +43 (0) 5 99 05-34444
E-mail: investor.relations@bawaggroup.com

Media:
Manfred Rapolter (Head of Communications, Spokesman)
Tel: +43 (0) 5 99 05-31210
E-mail: communications@bawaggroup.com

This text can also be downloaded from our website: https://www.bawaggroup.com

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